Indian bonds are among the least susceptible to fluctuations in Treasury yields in Asia

A Bloomberg examination of the movements since 2022 shows that rates on benchmark Indian notes increased by an average of 0.23 basis points for every basis-point advance in the 10-year US paper. Indian bond rates dropped by 0.32 basis points in response to a comparable decline in US debt.

Prior to being included in significant international indexes, Indian debt was more appealing since it is holding up better than most of its Asian counterparts despite fluctuations in Treasury rates.

A Bloomberg examination of the movements since 2022 shows that rates on benchmark Indian notes increased by an average of 0.23 basis points for every basis-point advance in the 10-year US paper. Indian bond rates dropped by 0.32 basis points in response to a comparable decline in US debt.

According to Mitul Kotecha, director of FX and EM macro strategy for Asia at Barclays Plc, "India is benefiting from a very positive domestic story," highlighting the rupee's stability, fiscal restraint, and the impending inclusion in the index. "India will see an increase in portfolio inflows due to these factors."

The confidence around local assets is being bolstered by the relative stability of Indian bonds. India's foreign exchange reserves reached a record high in April, and despite a strong dollar, the rupee has continued to outperform other rising Asian currencies, indicating growing investor interest.

Global investors have poured $8 billion into so-called Fully Accessible Route securities since JPMorgan Chase & Co.'s announcement in September. Standard Chartered Plc. anticipates a further influx of up to $30 billion at the commencement of India's inclusion in June.

Because China has more regulations than other rising Asian countries, its bonds respond to US notes the least. In spite of this, investors could still choose Indian debt because of the low volatility of the rupee.

Because of their closer trade ties and narrower spread over Treasuries, other Asian currencies and bonds are more susceptible to fluctuations in the value of the yen and yuan. According to a Bloomberg examination of situations where the US yield changed by more than 30 basis points over a 10-day period, South Korean bonds are the most susceptible to changes in the Treasury.

According to a report by Goldman Sachs analysts including Danny Suwanapruti, the ringgit and the rupee are the most susceptible Asian currencies to the dollar-yuan and dollar-yuan, while the peso and rupee are the least sensitive.

The government's reform and budgetary austerity policies have also benefited India's bonds. Now, investors are concentrating on the impending national elections, which might increase the desirability of local assets if Prime Minister Narendra Modi wins a third term.

Paul Greer, a money manager with Fidelity International in London, said that he thought the Indian election will be one of the less volatile political events this year. Even if investing in India may carry certain risks, the country is "a good story." I feel really positive about it," he said.